The (Non) Impact of Minimum Wages on Poverty: Regression and Simulation Evidence for Canada

Abstract

We estimate the effect of minimum wages on poverty for Canada using data from the Survey of Labour and Income Dynamics (SLID) for 1997 to 2007 and find that minimum wages do not have a statistically significant effect on poverty and this finding is robust across a number of specifications. Our simulation results, based on the March 2008 Labour Force Survey (LFS), find that only about 30 % of the net earnings gain from minimum wage increases goes to the poor while about 70 % “spill over” into the hands of the non-poor. Furthermore, we find that job losses are disproportionately concentrated on the poor. Our results highlight that, political rhetoric not-withstanding, minimum wages are poorly targeted as an anti-poverty device and are at best an exceedingly blunt instrument for dealing with poverty.

Financial assistance from the Social Science and Humanities Research Council is gratefully acknowledged.

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